LEINER HEALTH PRODUCTS, INC.

NBTY draws upon nature's bounty to cash in on the market for preventive and alternative health care. As the largest vertically integrated source of nutritional supplements in the US, the company manufactures, wholesales, and retails more than 25,000 products including vitamins, minerals, herbs, and sports drinks. Brands include Ester-C, Nature's Bounty, Balance Bar, Solgar, and Sundown. NBTY has manufacturing facilities in Canada, China, the UK, and the US and is able to produce and package capsules, tablets, powders, and liquids. The Carlyle Group-owned company sells its goods through pharmacies, wholesalers, supermarkets, and health food stores around the world.

Operations

NBTY organizes its business into four operating segments: Wholesale, North American Retail, European Retail, and Direct Response/E-Commerce. The company get the bulk of its revenues from its wholesale operations. Unlike many of its competitors that rely upon third-party manufacturers, the company actually manufactures 90% of the nutritional supplements that it sells and also serves as a third-party manufacturer of private-label products for a broad range of retailers.

In North America NTBY operates more than 400 Vitamin World stores in US malls. It European retail segment includes about 750 Holland & Barrett stores (including 29 franchised stores in China, 28 franchised stores in Singapore, 11 franchised stores in the United Arab Emirates, nine franchised stores in Cyprus, four franchised stores in Malta, and one franchised store in Gibraltar and Hungary), 55 GNC stores in the UK, 146 De Tuinen stores in the Netherlands, and 47 Nature's Way stores in Ireland.

In addition to its retail stores, NBTY operates Puritan's Pride, which sells nutritional products through mail-order catalogs and over the Internet. Based upon the success of the Puritan's Pride site, the company is establishing additional websites to support its brick-and-mortar retail brands.

Geographic Reach

In the US the company has manufacturing plants in Arizona, California, Florida, New Jersey, New York, and North Carolina. Internationally, it has plants in Winnipeg and Manitoba in Canada, and in China and the UK. NTBY's products are marketed and sold in approximately 100 countries.

The US accounts for around 60% of NBTY's revenues. The UK is its second-largest market, representing more than 20%.

Sales and Marketing

The wholesale segment sell its products through all major mass merchandisers, club stores, drug store chains, and supermarkets. It also sells its products to independent pharmacies, health food stores, the military, and other retailers.

NTBY markets its products through print, media, and cooperative advertising and also through radio, television and internet advertising. In the UK and Ireland, Holland & Barrett advertises on television. Holland & Barrett, GNC (UK) and Nature's Way advertise in national newspapers and conduct sales promotions. In addition, Holland & Barrett, GNC (UK) and De Tuinen each publish their own magazine with articles and promotional materials.

Wal-Mart accounted for 11% of the company's total sales in fiscal 2014. Other major customers include Costco, CVS, Walgreens, Kroger, and Target. NBTY spent $203 million on advertising in 2014, up 7% from $164 million in 2013.

Financial Performance

NBTY has enjoyed unprecedented growth over the last few years. Revenues increased 1% in fiscal 2014 to peak at $3.21 billion, versus $3.16 billion in 2013. That growth was driven by increases in the European Retail and Direct Response/E-Commerce segments. A 15% spike in sales from the UK and the Netherlands also helped.

However, the company reported a net loss of $44 million in 2014 (compared to the $129.5 billion in profits reported in 2013). The loss was primarily due to goodwill and intangible asset impairment charges related to the North American Retail and Direct Response/E-Commerce segments. Added expenses that year, including promotional expenses, also impacted net income.

Cash flow from operations fell 67% to $102.7 million in 2014 due to the net loss, as well as an increase in capital used for inventory and accounts payable.

Strategy

Spotting trends early and riding them wisely is crucial in the nutritional supplement industry. While the company keeps an eye out for new products, in recent years it hasn't spent much on research and development, preferring instead to simply acquire or copy products with proven sales.

NBTY has grown big and strong as the entire natural products industry has boomed, but a steady diet of acquisitions has supplemented its growth. NBTY's sales are still heavily concentrated in the US and UK. It has plans to deepen its presence in emerging international markets where the growing amount of consumer income can be used to alleviate nutritional deficiencies.

To streamline its operations, NBTY restructured its operations throughout 2013 by closing seven manufacturing and distribution facilities.

Mergers and Acquisitions

In 2013 the company acquired Belgian firm Essenza, which operates more than a dozen retail stores, for some $4 million.